How to Have it All: Trade Secrets and Right-to-Know
Issue Summary by Paul Orum, Working Group on Community Right-to-Know

 

[Version 11-01-01]

 

Protecting confidential business information under right-to-know laws is important, but not difficult.  Some environmental laws effectively limit secrecy claims.  For example, under the Toxics Release Inventory less than one percent of facilities file secrecy claims.  Other environmental laws lack effective limits, such as the Toxic Substances Control Act, under which the majority of some elements are routinely withheld as trade secret.

 

Below are four stand-alone fact sheets:

 

• Right-to-Know Laws Protect Trade Secrets shows how simple restrictions both respect and successfully limit secrecy claims (using statistics from New Jersey, Massachusetts, and U.S. EPA);

 

• Upfront Substantiation Reduces Secrecy Claims compares flawed procedures under the Toxic Substances Control Act to effective procedures used under the Toxics Release Inventory;

 

• Standard Recommendations for Handling Claims of Confidential Business Information details specific restrictions that can limit trade secrecy claims, while maintaining needed confidentiality; and,

 

• Ten Ways to Limit Trade Secrecy Claims presents general themes for U.S. EPA to reform confidential business information rules across environmental laws; and,

 

These are all draft fact sheets.  Your specific comments and suggestions are welcome.

 

 

Right-to-Know Laws Protect Trade Secrets

 

[Revised 10-29-01]

 

Right-to-know laws help prevent industrial toxic pollution by enabling people to track chemical use, waste, or releases to the environment.  Reporting on chemical use in particular helps industry find ways to improve efficiency, identify theft, and prevent pollution.  But the chemical industry often claims, among other objections, that reporting chemical use (called “materials accounting”) will disclose trade secrets.  However, figures from two states, New Jersey and Massachusetts, and the U.S. EPA show that few companies ever claim chemical use or pollution data as trade secret.  Such claims are limited through simple, common sense restrictions (detailed below).

 

The charts below show that trade secrecy claims cover:

·        Just 2.5 percent of chemical right-to-know reports in New Jersey;

·        Only 3.0 percent of chemical right-to-know reports in Massachusetts; and,

·        Below .08 percent of right-to-know facilities under the Toxics Release Inventory.

 

New Jersey Community Right-to-Know Program Trade Secret Claims on Chemical Throughput Information 1
Reporting Year	Total Facilities Reporting	Secrecy Claims2 (Facilities)	Total Reports Submitted	Secrecy Claims2 (Reports)
1987	586	3  (0.5 %)	1,463	12  (0.8 %)
1988	567	3  (0.5 %)	1,453	11  (0.8 %)
1989	588	5  (0.9 %)	1,448	17  (1.2 %)
1990	637	5  (0.8 %)	1,704	23  (1.3 %)
1991	717	5  (0.7 %)	2,721	31  (1.1 %)
1992	722	4  (0.6 %)	2,623	22  (0.8 %)
1993	695	5  (0.7 %)	2,749	34  (1.2 %)
1994	659	6  (0.9 %)	2,470	36  (1.5 %)
1995	580	6  (1.0 %)	2,296	43  (1.9 %)
1996	518	5  (1.0 %)	2,060	40  (1.9 %)
1997	458	6  (1.3 %)	1,924	49  (2.5 %)

 

1. Under New Jersey’s Worker and Community Right-to-Know Act of 1983, companies report the amount of a toxic chemical used, produced, brought on-site, shipped off-site as waste or product, held in inventory, and released to the environment.

 

2. New Jersey automatically accepts trade secrecy claims as valid unless contested (and to date no secrecy claims have been contested).  Firms are not required to submit up-front substantiation.

 

 

(Continued)

Massachusetts Toxics Use Reduction Program Trade Secret Claims on Chemical Use and Byproduct Information 3
Reporting  Year	Total Facilities Reporting	Secrecy Claims4 (Facilities)	Total Reports Submitted	Secrecy Claims4 (Reports)
1990	686	8  (1.2 %)	2,122	37 (1.7 %)
1991	727	12  (1.6 %)	2,395	59  (2.5 %)
1992	726	14  (1.9 %)	2,639	60  (2.3 %)
1993	694	13  (1.9 %)	2,659	53  (2.0 %)
1994	652	12  (1.8 %)	2,518	52  (2.0 %)
1995	574	11  (1.9 %)	2,356	59  (2.5 %)
1996	547	10  (1.8 %)	2,282	62  (2.7 %)
1997	521	10  (1.9 %)	2,200	67  (3.0 %)
1998	520	9  (1.7 %)	2,229	66  (3.0 %)

 

3. Under Massachusetts’ Toxics Use Reduction Act of 1989, facilities report the amount of a toxic chemical manufactured, processed, otherwise used, generated as byproduct, or shipped as or in product.  They report also, by production unit, reductions in byproducts and emissions from a baseline year.

 

4. Massachusetts’ restrictions on trade secrecy claims are similar to Federal law (see below).

 

U.S. EPA Toxics Release Inventory Trade Secret Claims on Toxics Release and Waste Management Data 5
Reporting Year	Total Facilities Reporting	Secrecy Claims6 (Facilities)	Total Reports Submitted	Secrecy Claims6 (Reports)
1987	21,859	7  (.03 %)	80,915	7  (.01 %)
1988	23,862	5  (.02 %)	88,250	5  (.01 %)
1989	24,838	7  (.03 %)	88,315	7  (.01 %)
1990	25,394	8  (.03 %)	88,155	8  (.01 %)
1991	25,020	10  (.04 %)	85,794	12  (.01 %)
1992	24,669	12  (.05 %)	83,796	14  (.02 %)
1993	24,052	10  (.04 %)	81,878	12  (.01 %)
1994	23,076	18  (.08 %)	76,220	18  (.02 %)
1995	22,859	15  (.07 %)	76,139	16  (.02 %)
1996	22,340	15  (.07 %)	73,669	16  (.02 %)
1997	21,927	16  (.07 %)	73,076	19  (.03 %)
1998	21,517	15  (.07 %)	72,073	18  (.02 %)

 

5. Under the Emergency Planning and Community Right-to-Know Act of 1986, facilities report toxic chemicals released as waste to air, land, or water.  Under the Pollution Prevention Act of 1990, these firms also report production waste generated prior to recycling, treatment, or other waste management activities.

 

6. Figures exclude claims that were withdrawn or denied.  A company is not entitled to trade secrecy protection if: 1) the company has already disclosed the information (other than in limited protected circumstances) or failed to take reasonable steps to protect it; 2) another law already requires the company to disclose the information; 3) the information is readily discoverable through reverse engineering; or, 4) disclosure won’t substantially harm the firm’s competitive position.

Upfront Substantiation Reduces Secrecy Claims

 

A Primer in Confidential Business Information

 

Confidentiality of information allows businesses to protect research programs and marketing plans, specific product formulations, details of manufacturing processes, and the economics of their operations.  Disclosing trade secrets could hurt a company’s competitive position.  However, protecting trade secrets is not difficult under environmental laws.

 

While protecting confidential business information (CBI) is important, it should not become a loophole to undermine meaningful public access to essential health and safety information.  A 1992 study by Hampshire Research Associates found that under the Toxic Substances Control Act (TSCA) many things were being classified CBI, including: 90% of all premanufacture notices for new chemicals; 95% of all polymer exemption submissions; 25% of all substantial risk notifications; and 20% of all reported health and safety studies. 

 

Hampshire notes the great unevenness in CBI claims when comparing similar chemicals under TSCA and Toxics Release Inventory (TRI) programs.  Depending on the assumptions used, TSCA claims were between 10 times and 1,500 times the rate of trade secrets claimed under TRI.  Both TSCA and TRI are EPA programs – but TRI has superior up-front standards for carefully limiting trade secrets claims.

 

For most TSCA requirements, the applicant merely labels the information as “confidential,” “proprietary,” or “trade secret,” with no up-front substantiation.  In some cases, the applicant need only check off a box on a form.  The burden is on EPA to later challenge these claims.  (The agency has taken limited steps to ensure that only actual CBI information is claimed as confidential.)

 

Under the TRI program, in contrast, the burden is on the applicant to justify its CBI claim.  This up-front substantiation, along with simple, common-sense restrictions on trade secrecy, resulted in only 18 trade secret claims out of some 72,073 TRI forms submitted in 1998.  The TRI test has not been onerous or harmful to corporations, and yet has limited secrecy claims to a small fraction of those submitted under TSCA – even though many companies are subject to both statutes.  Accordingly, EPA should begin a process for applying the TRI procedures for CBI across the agency to promote public understanding of environmental and health risks.  EPA should: (a) identify all statutory and regulatory policies affecting trade secrets; (b) develop a list of all CBI and trade secrets; (c) develop a procedure for reviewing all existing trade secret claims; and (d) advocate statutory changes, if necessary, to conform CBI policies to TRI procedures. 

 

To the extent permitted by law, EPA should employ the CBI principles enumerated above.  Where statute prohibits adopting this approach to CBI claims, EPA should recommend changes in those laws in order to be consistent with TRI principles and TRI confidential business information practices.

 

Adapted from “A Citizen’s Platform For Our Environmental Right-to-Know,” OMB Watch, March 2001

Standard Recommendations for Handling

Claims of Confidential Business Information

 

These recommendations for handling confidential business information (CBI) are adapted from the methods for handling such claims under the Toxics Release Inventory program.

 

1.      Submitters must substantiate CBI claims at the time of filing (“up-front” substantiation).  No information should be permitted as a trade secret or CBI unless the submitter was able to show that:

 

·        The identity of the item, such as the name of a chemical, is not readily discoverable through reverse engineering;

 

·        Disclosure of the information is likely to cause substantial harm to the competitive position of the submitter;

 

·        The information is not required to be disclosed to the public under any other Federal, state, or local statute; and

 

·        The information has not been disclosed to any other person, except the government and those bound by confidentiality agreements, and the submitter has taken reasonable measures to ensure the confidentiality of the information.

 

2.      A high-level corporate official must sign the substantiation.

 

3.      Submitters making false CBI claims should be subject to significant penalties; these penalties should be enforced.

 

4.      EPA should hold as confidential only specific chemical identities (but not a chemical class) and should release information that is not secret, such as submitter information.

 

5.      EPA should impose a narrow definition of allowable claims, along with “class determination” of data types that never may be classified as CBI.  This might include:

 

·        Company name, contact information (mailing address, phone number), and locational information (street address, latitude and longitude, etc.);

 

·        The chemical name and Chemical Abstract Service (CAS) number of any chemical that is the subject of a health and safety study or report (under TSCA);

 

·        Any information that can be obtained from a public or government source (newspaper articles, public corporate reports, satellite imagery, etc.); and

 

·        Any other information that interferes with the agency’s ability to carry out its mission or statutory intent.

 

Adapted from “A Citizen’s Platform For Our Environmental Right-to-Know,” OMB Watch, March 2001

 

Ten Ways to Limit Trade Secrecy Claims

 

Protecting trade secrets under environmental laws is important, but not difficult.  Unfortunately, many federal environmental laws do not have effective, simple limits on trade secrecy claims submitted by regulated companies.  These secrecy claims can impede important public access to health and safety information.  Below are basic ways to carefully limit secrecy claims under laws that inform both government and the public about health hazards and the status of environmental laws.  These recommendations summarize some key points derived from years of work by many organizations.  The ten recommendations are based on comments to the U.S. Environmental Protection Agency (EPA) submitted by the Working Group on Community Right-to-Know in May 2001. ¹

 

In general, EPA should limit confidential business information (CBI) by:

 

[1] Recognize that protecting CBI information is important but not difficult.  CBI claims need not interfere, if carefully limited, with effective community right-to-know programs.  Trade secrecy claims filed under EPA’s Toxics Release Inventory amount to less than one-tenth of one percent of right-to-know reports.²  Under more detailed right-to-know laws in Massachusetts and New Jersey, less than three percent of reports filed contain secrecy claims.³  These states both require relatively thorough “materials accounting” information on chemical use.

 

[2] Get non-confidential information out of the CBI system.  Make non-confidential information readily available to the public separately from any confidential information.  In 1986, environmental, government, and industry representatives produced a consensus agreement on proposed changes to the Toxic Substances Control Act (TSCA).  These proposed changes would index information – by chemical, state, plant site, and submitter – so that people can get non-confidential TSCA information in a timely and well-organized manner.⁴

 

[3] Put information on-line to reduce burdens on many data users.  Avoid individual Freedom of Information Act (FOIA) requests by putting non-confidential information into well-organized, on-line public databases.  Individual FOIA requests submitted on paper to a government agency are slow, cumbersome, and expensive for the person who requests information, for the government agency, and sometimes even for the company that submitted the information.  For this reason, amendments to FOIA passed in 1996 instructed government agencies to provide electronic access to public information that is likely to be subject to repeated requests.

 

[4] Require up-front substantiation of CBI claims.  Up-front substantiation can avoid many unnecessary secrecy claims.  Up-front standards establish predictability and reduce the burden on EPA to challenge claims after the fact.  For example, EPA’s Toxics Release Inventory uses a simple form for up-front substantiation.⁵  Substantiation should include a certification by a senior manager to deter frivolous claims.